Credit Unions and Name Change: Does Name Change Mean Anything?

When an organization chooses its name at formation, it becomes a central part of its identity and the name is usually positioned in the minds of its [key] stakeholders for the life of the entity. Usually, when choosing an organization’s name, focus is placed on certain attributes such as the products, services and operations or the geographical region or clientele served.

Given the dynamism in the business environment among other factors, the owners of an organization may elect to change the name for various reasons:

• to create a “new image” of the organization or
• to better reflect the “business” focus.

Usually, the focus when changing the name is on either the core products (and/or services) or the core (or new core) business due to changes in the business model. Changes in the business model could be due to regulatory influences, diversification and competition among other forces.

Over the past five years, there has been remarkable increase in the number of name changes by Credit Unions (locally referred to as Savings & Credit Cooperatives – SACCOs) in Kenya. This prompted me to perform a basic inquiry as to whether these name changes have anything to do with a SACCO’s performance and alas! The answer is YES, name changes by SACCOs, accompanied by appropriate strategies, have had an impact on the [financial] performance of these SACCOs. The diagram below provides a sneak preview into the prevalence of name changes in Kenya, showing that name changes have increased from 6 in 2010 to 69 in 2015!

One may ask: why the name changes? Based on a review of various documents discussing the name change by five randomly selected SACCOs in Kenya denote diversification, growth and performance as key factors which motivated the name change as illustrated in the following quotes (names of the actual SACCOs have been withheld):

“The SACCO has officially changed its name to “SACCO A LTD”. It has also changed its logo, colours and the slogan. It is our hope that this change will also be in our hearts in order to achieve the intended goals and objectives”. [In the chairman’s report of SACCO A]

“Our Sacco has changed its name to reflect national coverage. We hope to attract more membership given our changed name...” [In the chairman’s report of SACCO B]

“…delegates approved the change of the society’s name so that it could have a national and international outlook. This would attract other members to join the Sacco and improve performance.” [In the minutes of the annual delegates meeting of SACCO C]

“…we should rebrand the Sacco, give it a new name and expand our area of operation. This will enable us to access new business and have a regional and national presence”. [In the minutes of the annual delegates meeting of SACCO D]

“…rebranding process: the new name NEW SACCO E was identified and the same was advertised through the Daily Nation. Rebranding was a process that was to continue with a view to sustaining the Sacco’s growth”. [In the minutes of the annual delegates meeting of SACCO E]

The decision to change an organization’s name requires the involvement of key stakeholders due to the considerable costs and potential risks that may arise. For instance, when Nissan was selling cars in the United States under the name Datsun, changing the name back to Nissan in the mid-1980s cost the firm between US$ 30 million and US$ 100 million. Further, the decision by Andersen Consulting to change its name to Accenture in 2001 cost the firm an estimated US $ 100 million. The costs associated with name change relate to:

• lost clientele
• the time taken to rebuild the changed image.

However, the costs incurred following name change depend, primarily on the reason for the change. The costs of name change vary if the reason for name change was due to adverse publicity or other factors associated with changes in the business environment. Large organizations such as Tokyo Tsushin Kogyo (Sony), Blue Ribbon Sports (Nike), Standard Oil (Exxon) and Takachiho Seisakusho (Olympus) have experienced name change. The name change have been aimed at re-branding that is not related to adverse publicity.

Regulatory requirements in changing a SACCO’s name in Kenya

According to the Cooperatives Act, for a cooperative society to have its name changed, the following procedure must be followed:

• a special meeting should be called and a special resolution passed;
• an application  should be made to the commissioner and a written approval obtained on the name change;
• the new name should not resemble a name of a similar existing cooperative society;
• upon effecting the name change, the cooperative society must inform the commissioner who will delete the former name and insert the new name in the register;
• the new name is then published in the Kenya Gazette.

What are the effects of name change on the cooperative society?

• The name change does not affect any of the society’s rights and obligations;
• The rights and duties of members remain unchanged;
• If there were any legal proceedings subsisting at the time of the name change, the proceedings will remain unaffected

It is important to note that name changes may be ‘major’ or ‘minor’. A ‘major’ name change occurs whereby the new name adopted is completely different from the old name. For example, the change from “Baringo Farmers SACCO Ltd.” to “Skyline Ltd.” would be regarded as a ‘major’ name change.  “Minor” name change refer to those changes where a minor adjustment to the original name (e.g. insertion of a word) is made. For example, the change from “Mwalimu SACCO Ltd.” to “Mwalimu National SACCO Ltd.” In the case of SACCOs that changed name between 2010 and 2015, over 90% of the name changes were ‘major’, denoting a strategy by these SACCOs to widen their reach. It is also notable that over 94% of these SACCOs are also licensed by the SACCO Societies Regulatory Authority (SASRA). 

One would construe that these SACCOs intend to compete with commercial banks and micro-finance institutions, and this threat is real, given that the number of individual’s savings with SACCOs in Kenya is higher, if the latest survey results by Financial Sector Deepening Trust (FSDT) is anything to go by. According to the survey by donor-funded FSDT Kenya, 22.3% of commercial bank accounts were dormant or closed compared to 3.1% in SACCOs, 2.4 per cent in micro lenders and 1.2%for mobile bank account.